The weakening Euro currency and looming energy crisis have put further pressure on EUR/USD pair which has registered a breakdown on the charts.
The US Dollar seems to be gaining strength across a range of financial markets. Traders across the globe are preparing for the Fed’s pivot to raising interest rates once again. As per market estimates, the Fed shall announce another 75 basis points surge next month in September. At the same time, the US Treasury yields remain elevated while the U.S. Dollar basket is also trading at a one-month high. It looks as if the US Dollar is gaining strength against the structurally weak Euro with EUR/USD pair tooling to hit the 1.0000 milestone.
Aid the recent consolidation, the EUR/USD has given a downside break with volumes and wider ticks. After violating Friday’s low of 1.0032, the currency pair continues with its two-day losing streak. The last time we got at the 1.000 parity for the EUR/USD pair was in the month of July. This happens are the outlook for the European economy and European currency looks bleak. As reported by Forex Live, “the July low at 0.9952 will also be technical support to be wary of but nothing comes bigger than parity for the pair at the moment. If we do see a break to the downside, the drop could quickly accelerate towards 0.9800 next at least”.
In case things turn really bad, the EUR/USD pair could also see 0.9610 come into play, the levels that were last seen two decades ago.
Energy Woes Hurting the EUR/USD Pair More
Post-Russia’s invasion of Ukraine, Europe has been facing a major energy supply challenge. On one hand, it has put several sanctions on Russia but on the other hand, it faces the risk of a major energy shortage with Russia being one of the biggest suppliers of gas to Europe.
With the German year ahead, power is trading at a fresh record high of EUR545/MWH. With energy prices soaring and a disrupted supply chain, the German government has warned of a stagnating economy and a gloomy picture ahead.
As per the German PPI data released on Sunday, August 21, the price of goods and services in the wholesale market has touched new record levels. Retail players have continued to build long positions in EUR/USD.